Franchisor fails by invoking a non-compete clause

Although a non-compete clause is validly formulated in a franchise agreement, a situation may arise that is so diffuse that the franchisor cannot invoke it. See the judgment of the Arnhem-Leeuwarden Court of Appeal of 10 October 2017, ECLI:NL:GHARL:2017:8777.

The Court of Appeal shares the view of the preliminary relief judge who previously ruled that the franchisor could not invoke the non-compete clause. This was because the leased retail property had to make way for housing and the franchisor had terminated the franchise agreement per  canceled on January 1, 2012. In anticipation of new business premises to be rented from the franchisor, the franchisee (temporarily) operated a business under his own name. It was uncertain whether the franchisor would still be able to offer (suitable) business premises to continue the collaboration.

If, upon termination of a franchise agreement, a franchisor leaves open whether the post-non-compete clause applies, this ambiguity can under certain circumstances be held against the franchisor.

Ludwig & Van Dam Franchise attorneys, franchise legal advice. Do you want to respond? Go to dolphijn@ludwigvandam.nl .